Thursday, October 27, 2016

If "Labour Abundance" is Lemons...

Then perhaps it's time to learn to make lemonade. Of course, easier said than done! In a book chapter ("The Wealth of Humans") titled "The Virtues of Scarcity", Ryan Avent writes:

Historically, the labour market's fortunes - as captured in how labour is used within the economy, how it is compensated, and how politically strong it can claim to be - have hinged critically on the extent to which labour is a scarce factor or a plentiful one.

He adds:

But the dividend to scarcity has never been any great historical secret, and groups of people have often fought to obtain scarce status for themselves within an economy, at the expense of other groups of workers. Workers seek to make themselves scarce by reducing the capacity of others to compete with them...Yet the most powerful and durable form of discrimination-induced artificial scarcity is that created by borders.

Much of today's labour abundance has its beginnings after the start of the new century. Avent notes three major causes: globalization, automation, and the boost in productivity which technology can often provide for high skill workers. Meanwhile, a growing labour abundance also means further polarization in the labour market, even if skills polarization didn't become obvious until the Great Recession. Like the authors of this study, I've noted the prevalence of high skill offerings in classifieds for employment, especially in areas where a wider variety of job offerings have been in short supply for some time.

Yet it's also a growing concern for city employment, as middle skill jobs are gradually replaced by employment requiring professional levels of skill. Previously, the risks of moving to new areas weren't so high, for anyone seeking work in a low to middle skill range. Now, middle skill workers end up compromising with positions requiring less skill. Further, much in these work categories may not be easy to procure, beforehand. Which means low skill work is more likely to be found, after one has already taken a chance on relocating to a new area - all the more risky if there are no family or friends nearby.

I can understand the reluctance of many to take their chances in this regard, because of the many moves I've made over the years. Plus: the older one gets, the more that low skill work becomes a gamble for one's health, and the resulting doctor's bills might end up more substantial than one's paycheck. In a Bloomberg article about universal basic income, Tyler Cowen muses about the prime age males who have dropped out of the labor force:

Many are capable of working, yet these individuals typically are not taking the jobs that immigrants might end up filling. Either they shy away from hard work, don't want to move to where jobs are, or don't like the low social status of these jobs, among other possibilities.

I no longer see getting money to those males as the central social problem. Instead, the core issue is how to make the work that's available to them sufficiently rewarding, in cultural as well as economic terms.

If the kinds of jobs created by the modern service economy can be made more attractive, I think much (not all) of the work problem will take care of itself. Most people do wish to work in jobs they enjoy, as a source of pride, money, and social connection.

Is it possible to bring back middle skill work, given the fact that many people could still benefit from middle skill time based services? Indeed, much of the services based work which people would find meaning in providing for one another, actually consists of these possibilities. Equally important, is the need to structure middle skill work potential in ways that people will eventually be able to take the chance of moving, secure in the knowing they can participate in a group structure which offers more opportunities to generate middle skill work.

That said, the time arbitrage of knowledge use systems would compensate time value as a basic commodity, instead of the middle income levels which became standard in the 20th century. Which is why these living and working environments would need considerable exposure to infrastructure and building innovation at the outset, for this form of wage structure to be a reasonable option.

Labour abundance does not have to be a negative. Only consider the primary source of today's wealth, and one can take heart: human capital. Granted, much of this capacity presently exists in the artificial scarcity and agglomeration effects of prosperous cities. Even though it would take time to realign knowledge use to the participation of lower population densities, it can be done. Indeed, the artificial scarcity of knowledge use contributes to the underlying scarcity of property in the most highly desired regions, as expressed by their high property values.

Also, the wealth creating effect of group agglomeration, need not be limited to the concentrated high skill variety, for time value can be horizontally coordinated and patterned for full participation. Ultimately, productive organizational capacity has become too scarce, in relation to the economic environments it is expected to somehow support and maintain. In all of this, labour abundance can be put to good use in ways which were not always possible, or in some instances even imaginable, in the all too recent past.